While yesterday’s report of company record setting revenues from Changyou might be a plus for the gaming industry, major French publisher Ubisoft reported a massive 51 percent drop in Q1 sales to €83 million, or approximately $114 million. This drop represents a missed financial guidance target of 12 percent. Low numbers are attributed to slow sales of Nintendo DS titles, as well as back catalogue PS3 and Xbox 360 games. Company Chief Yves Guillemot said that sales in both the U.S. and Europe have seen a “very sharp slowdown.”
“We are currently experiencing a very sharp slowdown in our sales for Nintendo DS as well as sales of back-catalog titles, in the context of a market that is tougher than anticipated,” Guillemot said. “This will have a significant impact on our first-half showing. Against this backdrop, the solid performance of our Wii titles combined with the successful launches of Anno and Call of Juarez are points of satisfaction and demonstrate that good products are continuing to sell well.”
However, it’s not just the sharp slowdown that’s affecting Ubisoft. Guillemot also points to piracy, specifically in the DS sector, as a factor in the company’s poor showing. “Piracy is strong so we are working to put new figurines and new elements in the boxes that will change that in the future… for example in Europe we have the same market share in DS this year as last year…,” Guillemot said. “We see a different attitude toward piracy in the U.S. than Europe. We did a survey that said our consumers will be more willing to buy products than pirate them. ”
This under-performance has led Ubisoft to take on some “damage control” measures. To that end, Ubisoft has reduced its Q2 projections to €80 million ($110 million). Previous Q2 projections were set at €130 million, or $178 million. This deflation of numbers will then represent a 54 percent decrease in Ubisoft’s year-over-year revenues from 2008.
Notably, Ubisoft’s delays in getting Spinter Cell Conviction and Red Steel 2 out the door don’t bode well. Likewise, Ubisoft has also delayed the releases of Ghost Recon and I Am Alive from a projected date sometime in Q4 09 to sometime in 2010.
“We are disappointed that we have to postpone the release of several major games but we consider that this choice is the best one in the long-term interests of Ubisoft,” Guillemot added. “…The excellent response to our games at E3, as well as the high buzz generated for titles such as Assassin’s Creed 2, Splinter Cell Conviction and Avatar, reinforce our belief that the company can achieve strong growth in the second half of the fiscal year.”
With troubling numbers, release date delays, and piracy running rampant, the question begs to be asked; Is now the time that Ubisoft might want to start taking a long hard look at the free-to-play model? Historically, game development has been done at a rather rapid pace (be that a plus or minus), and piracy would literally be eliminated. Granted, Shadowbane went the F2P route, but was closed on July 1 of this year, but we’re also looking at a title that’s almost 6 years old, and lagged behind in a number of areas of today’s free-to-plays. Let’s see just how, and with what Ubisoft can pull itself out of the slump.